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To: lorne who wrote (25489)	1/6/1999 9:11:00 AM
From: Alex	Respond to of 117017

Assets Shifted to Euro Sakakibara: the dollar is "bubble-like" CURRENCY strategists said yesterday that a big reallocation of assets was under way internationally as the euro gained ground for the second day in a row. The euro's sparky performance since its debut at the beginning of the week was attributed in part to increasing nervousness over the outlook for the dollar. The US currency fell to a 19-month low of 110.7 against the yen in Far Eastern markets overnight after the Japanese finance minister for international affairs, Eisuke Sakakibara, described the dollar as "bubble-like". Mr Sakakibara, known as 'Mr Yen' for his ability to move markets, also unnerved dollar investors by signalling his satisfaction with the rising value of the yen. Economists at Warburg Dillon Reed believe that the dollar will weaken to around 100 yen as the American economy slows, the current account deficit widens and Japan's crisis-hit banks start to sell off foreign assets and repatriate funds. The European Central Bank pumped 75 billion euros into banks across the euro area in the first financing operation of its kind. It said the money was intended to keep markets liquid and avoid problems during the difficult first few days of the new currency. The ECB was also rumoured to have used its financial muscle to prevent the euro rising too fast. But currency experts said intervention on the exchanges was unlikely as it would send the wrong signal to investors. The euro notched up further gains in terms of sterling, closing at £0.7119 from £0.7109. It has appreciated by 1pc since its launch. European stock markets gave up some of the big gains made on Monday, but investor enthusiasm for European bonds was undimmed. There was hefty demand for German bonds before today's launch of the first issue of German government "euro" bonds. The European Central Bank, which holds its inaugural meeting in Frankfurt tomorrow, has been at pains to dampen expectations of an immediate cut in the 3pc euro rate of interest. The deteriorating outlook for European growth highlighted in a report yesterday from one of Germany's leading economic institutes could nevertheless force a rate cut before long. The Berlin-based DIW institute has cut its growth forecast for the German economy this year from 2.1pc to 1.4pc. It warned yesterday that unemployment would remain stuck at over four million. It also predicted a slowdown in growth in the euro area as a whole to 1.9pc in 1999 from 2.8pc last year. The London Telegraph, Jan. 6, 1999